According to a member of ConsenSys, the creator of the platform could pause the contract. More than 1,200 addresses seek to obtain returns that exceed 200% per year for their money.
Decentralized finance (DeFi) platform Swerve has almost USD 547 million deposited in its smart contract. The anonymous developer of this contract could pause it at any time, which would cause investors to lose their money forever.
This DeFi platform, the same as others like Yearn Finance and Curve, offers its users the possibility of trading pairs of ERC20 tokens with immediate liquidity. In other words, there is no need to wait for another user with a matching offer, known as the market maker pool (or market maker).
Swerve allows making all possible exchange combinations between the DAI, Tether (USDT), USD Coin (USDC), and True USD (TUSD) stablecoins. These tokens receive their liquidity from other users who deposit them, previously converted into Swerv USD (SWUSD), in exchange for rewards in Swerve (SWRV), the native token to this platform.
At the time of writing this article, Swerve promises a 254.60% interest per year. This number is too good to be true and safe but does not seem to cause alarm among the 1,229 people (given that each address belongs to an individual) who keep their money in this smart contract.
Twitter as Marketing Space for DeFi Platforms
The Swerve platform, which has been operational since September 4th, spread like many other products in the DeFi ecosystem, through Twitter accounts of dubious identity and often recently created.
For example, user @MarioMusu5 stated that Swerve is a token “without pre-sale, not in the pockets of the development team, and not yet listed in any exchange (except for Uniswap).”
The marketing campaign seems to be giving good results, since exchanges OKEx, MXC, and Balancer also saw a business opportunity and incorporated Swerve to their exchanges, a day after that post.
Well-Know Developer Wonders Whether He is the Only One Who Realizes It
There were some other critical voices in the aforementioned social network. This was the case of John Lilic, a member of ConsenSys and co-founder of Code to Inspire, the first programming school for girls in Afghanistan.
He wondered whether he was the only one that realized that the anonymous founder of the Swerve contract could pause it at any time, thus locking all the funds forever. He also wrote, “Who else sees a lot of irrelevant copying and pasting of the Curve code?”
From Swerve’s official account, they responded that his assessment was wrong. As they said, only the governor (the DAO) can execute the kill_me command, which would pause the smart contract. They also told him that “this would stop future deposits and exchanges, but not withdrawals, and the governor could reverse the action.”
The aforementioned @MarioMusu5 participated in this conversation and replied to Lilic that he was able to enter and withdraw his funds as many times as he wanted. He said that he was even able to “reverse the transaction more than once.”
These responses did not seem to convince Lilic, who subsequently wrote that the developer could request 25% to resume the contract at any time.
Investors Could Lose Everything
Amid this DeFi fever, Swerve is not the only platform that could cause these kinds of problems. For example, the developer of the Ren platform could pause the contract, thus causing the loss of invested funds.
Besides, possible code errors could lead a few users to earn a lot of money or lose everything, the latter having happened at least twice in 2020. Users lost USD 750,000 on the Yam platform, while a typing error led the Hegic platform to freeze more than USD 28,000.
By Alexander Salazar